The Ministry of Justice (MoJ) recently published a consultation paper (CP9/2012) on Deferred Prosecution Agreements (DPAs) - a proposed new enforcement tool to deal with economic crime, such as fraud, bribery, corruption and money laundering, committed by commercial organisations.

The consultation paper can be accessed here.

Responses to the consultation are due by 9 August 2012. Hogan Lovells is putting together a response and would be interested in hearing your views.

What is a DPA?

A DPA is a voluntary agreement between a prosecuting authority and a commercial organisation that is accused of committing an economic crime.  DPAs will enable commercial organisations to avoid prosecution provided that the conditions set out in the DPA are fulfilled.  The consultation paper contemplates that DPAs will involve a multi-stage process.

First, the prosecuting authority will decide whether to enter into a DPA.  The MoJ foresees that this decision will be guided by a publicly available Code of Practice, to include the following factors:

  • the level of premeditation and whether any attempt was made to hide the wrongdoing;
  • how widespread within the commercial organisation the wrongdoing was and the seniority and number of the perpetrators;
  • any losses to innocent third parties e.g. pensioners;
  • the likely impact on the commercial organisation of prosecution and its financial health;
  • any action being taken in relation to the wrongdoing in other jurisdictions;
  • what action has been taken by the commercial organisation and the level of commitment to resolving the issues, to recovery and restitution of benefits, and to improving compliance; and
  • previous convictions and previous DPAs.  

Second, there will be preliminary proceedings before a judge, who will give an indication of whether he or she considers that a DPA is appropriate in principle.

Third, the terms of the DPA will be negotiated between the prosecutor and the commercial organisation.  The DPA will set out a number of conditions, which will vary from case to case, but will generally include a combination of a financial penalty, reparation to victims, and obligations on the organisation to create and implement proper monitoring or reporting procedures and training for employees.  The final terms of the DPA will be subject to the consideration and approval of the judge. 

Fourth, the organisation's compliance with the DPA will be monitored.  In the event of breach or non-compliance, the options include reconsidering and amending the DPA's terms, formal breach proceedings or revival of the prosecution.  The degree of judicial involvement at this stage is a matter on which the MoJ is seeking responses.

Finally, if there is full compliance, the charges will be withdrawn entirely.

The case for DPAs

At present, the tools available to the authorities to tackle economic crime are criminal prosecutions and civil recovery orders.  Both routes involve lengthy investigations and, in the case of prosecutions, lengthy court proceedings, which make them expensive and time consuming.  Investigations and prosecutions which drag on give rise to uncertainty and reputational damage.  Civil recovery orders, while increasingly popular in recent years, are not considered to be sufficiently punitive in nature to address major economic crimes, and their (over) use has been the subject of criticism (including by the courts).

The MoJ believes that DPAs would provide an additional and alternative enforcement tool to tackle economic crime that overcomes many of the current difficulties.  The MoJ argues that:

  • DPAs will act as an incentive for organisations to engage and cooperate with the prosecutor at an earlier stage to achieve a better outcome.  Commercial organisations which are prepared to admit wrongdoing and accept a penalty will avoid expensive and lengthy proceedings, while the resources of the prosecuting authorities and the courts will be freed up.  The MoJ foresees that the availability of DPAs may lead to an increase in self-reporting.  As yet, attempts to foster a culture of self-reporting are generally seen as having faltered.
  • DPAs will introduce greater certainty as to the possible outcome.  This will lessen investor disquiet and reduce the impact on a company's share price. DPAs should similarly lead to an outcome within a shorter time frame.
  • DPAs will contribute to closer cooperation between the UK and overseas jurisdictions.  

Questions for consultation

The consultation sets out a list of specific questions to which the MoJ is seeking responses.  There is also the possibility to provide comments on the subject of the consultation more broadly.

The key issues are as follows:

  1. Should there be additional and/or different factors that should guide a prosecutor's decision whether to enter into a DPA?
  2. Will the proposed level of judicial involvement be beneficial?
  3. Is the proposed multi-stage process appropriate?
  4. Will the availability of DPAs lead to an increase in self-reporting by companies?